The 2010 Amendments to Article 9 of the UCC are slated to take effect in most U.S. jurisdictions on July 1, 2013. One of the primary purposes of the 2010 Amendments is to promote uniformity by designating a reliable source of information for the debtor’s correct name — the debtor’s state-issued drivers license.
Going forward, it is critical for financing statements to accurately reflect the debtors’ names exactly as the names appear on state-issued drivers licenses.
If the filing jurisdiction has enacted the ‘only-if’ alternative under the 2010 Amendments, a security interest is perfected only if the debtor’s name on the financing statement matches the debtor’s name on his or her state-issued drivers license. If the state elected the safe harbor alternative, then the debtor’s name is adequately stated on the financing statement if it matches the name on the debtor’s state-issued drivers license.
Thus, under either alternative, the financing statement should exactly match the debtor’s name as it appears on the state-issued drivers license.
Part of our goal as creditor’s counsel is to identify risk and help you avoid it. It is reasonable to expect as time goes by, debtors will obtain new drivers licenses when they move or change names, or when the licenses naturally expire. If the new drivers licenses bear even the slightest name variation from the license relied on by the lender to prepare the UCC-1, a dispute could arise over whether the lender properly identified the debtor. A security interest could be challenged on grounds that the financing statement is seriously misleading.
In the past, few lenders kept copies of debtors’ drivers licenses on file. Now, it is going to be critically important to keep a copy of the drivers license relied on to prepare the financing statement. If a dispute arises in the future, the old drivers license may be the only evidence available to show that a lender complied with the drivers license name required under the 2010 Amendments in perfecting the lender’s secured status.
If you are a lender or other secured party with other questions about implementing the changes required by the 2010 Amendments, seek the advice of experienced legal counsel. The attorneys at Glass & Goldberg are committed to helping you minimize risk and manage uncertainty, and can help structure your policies and procedures to meet your goals.
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